The Kimball graphic. (Kimball, Brule County, Dakota [S.D.]) 1883-1905, 1887-01-07
MADE CLEAR AS DAY.
The Puts, Calls, Spread. and straddles of cha,

MADE CLEAR AS DAY.
The Puts, Calls, Spreads and straddles Of Change
Described.
"What are puts, calls spreads
and 'straddles?' asked a New York
Mail and Express reporter. .s1-,. H..
"Well," said John E. McCann, the
confidential clerk Of Russell Sage, Of
whom the question was asked, "I'll
tell you if you will promise never to
mention the poetical subject again. It
requires pretty deft wording to mako
the thing clear, so it is not an exhilar-
ating subject to talk on. You hear q
good deal about puts and calls but
venture to say there are fifty million
people in the United States who do
not know what they are, nor what
the meaning is of the word privileges.
Now, q privilege is acontr act by which
the maker of it, Russell Sage, S. v.
White, Jay Gould, or Harvey Ken
nedy, engage to purchase from the
holder in the one case, or to sell to the
holder in the other case, a number OF
shares OF some specified stock at a
". oe@AH ~ Nv, no e1Hy ol!ne WlInul u GER
taln period, at the option OF the hold
er. Got that"
"A CALI is a previlege bought Of the
maker at q certain price, and the
owner OF it is prevlleged to call for a
certain amount OF stock at given
price within thirty. sixty or ninety
days, four or SIX months. If q man
holds put he he's the right to de-
liver to the maker OF the previlege a
stock at certain agreed price within
certain number OF days. Clear? No?
Well let's try once more.
"suppose Western Union is selling
at 70. A man wants a sixty-day
put on 1t ut 90, because he believes
the stock as going down. He gives
Mr.. Sage, Mr.. White, Mr.. Kennedy, or
MIR. Gould oneper cent. on the amount
OF stock he wants to deal in. A hum
is sloo. He receives in return. a slip
OF paper signed by either one or the
other OF these gentlemen. Then il
Western Union goes below 66
within sixty days he may buy it
Tor whatever it is selling tor below
that price, and put it to the maker
OF the privilege at the price agreed on
moo-and receive a check for So, 600.
The holder makes the difference. All,
you understand? Ii telegraph does
not go below 66 the holder is out his
Sloo. The call" business operates
exactly In the opposits way. A man
buys the privilege OF calling Western
Union at u when it is selling at 20.
If it sells above Is you can call on the
maker OF the privilege for a hundred
shares at IS, and the hundred shares
are thus bought by the holder for ST.
500, and he turns around and sells it
at so If the stock is selling there, and
pockets the difference"
ga 'straddle' is q put and CALI
combined. The holder ofonemay put
stock to the maker OF the privilege
or call for it. .Straddles' come high,
because there is money in them,
whichever way the market
may go. II the market does
not go at all, but stands
still, why, the maker is in the. money
he has been paid for the privilege, usu-
ally about 3 per cent. or $500. A
spread is also a put and q CALI
combined, but there is this difference:
q 'straddle' is made at the. market,
That is to say, the maker ofthe priv
ileee takes the risk that the stock in
question does notmov to any extent
from the price at which it is selling
when the privilege is sold. In q
Spread the maker has more leeway.
Ii Western Union is selling at 70, to
go back to the old illustration, the
maker OF the privilege sells a spread, :
say at 81 and so. If it goes below
81 the holder can put the stock
and make the difference, and if it
goes above so the holder can CALI at
that price and reap the profits.
But so long as the price OF the stock
keeps within those points the maker
OF the privilege is safe. To put 1t in
another way, the holder OF 'strad-
die will make if the market for the
stock he is dealing In moves at all.
The holder or a spread doesn't make
anything until the market moves past
certain limits. There is one thing
more. The maker OF privilege only.
receives the money Tor which he sells
make thousands-or nothing.
calla ae ,aasflnoa maetlS.on % pues ana cans re-
Years AGO last snr;no when +be ] -, = rLat yua
went down with rush, and the hold